Does traditional radio have a future? Bankruptcies, digital disruption cast doubt

Updated Mar 8, 2019; Posted Mar 28, 2018

The iHeart Media headquarters is shown Thursday, March 15, 2018, in Phoenix. IHeartMedia, one of the world's largest radio companies, is seeking bankruptcy protection as part of an agreement with its lenders to reduce debt it took on to become a privately held company.(AP Photo/Matt York)

CLEVELAND, Ohio -- Reports of radio's impending death have persisted for decades. In the 1950s, television was supposed to lead to its demise. Then, with the advent of MTV in the '80s, video, you may recall, was supposed to the kill the radio star.

Radio, more specifically terrestrial radio, has survived, but questions of its long-term viability were amplified this month when iHeartMedia, the largest radio conglomerate in the U.S. with more than 850 stations, filed for bankruptcy. IHeart joins one of its competitors, Cumulus, owners of nearly 450 stations, in Chapter 11.

IHeart alone owns 12 radio stations in the Cleveland and Akron markets including Majic 105.7-FM, 106.5-FM The Lake and 96.5 KISS FM. Do their stations survive the company's current financial situation?

"iHeartMedia and all our stations are operating business as usual, and listeners and fans won't notice any difference in the programming, on-air personalities and stations they love," iHeart spokesperson Wendy Goldberg said in a email to cleveland.com.

Thom Mandel, CEO of Rubber City Radio, which operates four stations in the region, agreed.

"The reality is those radio stations are not going away," he said. "iHeart's bankruptcy has nothing to do with WTAM, WGAR or WMMS and everything to do with the fact they paid 20 or 30 times what those stations were worth to get them. Now, they can't pay the interest on them. That has nothing to do with the radio stations themselves."

SURVIVAL OF THE FITTEST

Financial stability isn't the only challenge threatening radio's survival. The industry is facing increased competition from everywhere -- from satellite radio to Internet-based streaming services, smart speakers such as Echo Dot or Google Home and even television.

"AM/FM radio had been able to wait out the digital disruption that has already affected every other form of media," Miller writes. "Now radio is the latest industry facing massive disruption from the digital age."

According to the report, time spent listening to radio has gone down from 20 hours a month to 14 hours, with that number even lower among millennials. Further, listening to AM/FM radio by teens 13 and older declined nearly 50 percent between 2005 and 2016.

"Gen Z music fans, born in 1995 or later, are embracing digital formats at the expense of radio use," Miller states. "Having grown up as true digital natives, this generation is uninterested in AM/FM radio and prefers the increased interactivity and personalization of digital services like Spotify and Pandora."

John Gorman, a former WMMS executive during its Buzzard heydays and who now runs Internet-based oWOW radio, doesn't see the tide changing in terrestrial radio's favor. "If you look at ages 12-34, there is very little radio listening in that demographic group. This is a generation that grew up without a need for radio," he said.

The ratings service Nielsen, however, disputed the NYU report's findings, saying "Generation Z spent over 35 hours per month listening to AM/FM radio and 88 percent of Generation Z use radio each week" in a response to Variety. In fact, a cursory look at local radio ratings shows an audience that isn't necessarily growing, but holding steady.

That holds true at Rubber City's stations, to an extent.

"Listernship hasn't changed much," Mandel said. "But we've probably lost an hour a week from our average listener over the last 5-10 years. I know it's gone to digital alternatives or Sirius."

THE FUTURE OF RADIO

If fuzzy bottom lines or heightened competition aren't going to deliver the final death blow to terrestrial radio, irrevelancy isn't going to either.

There will always be an appetite for local news, sports, weather and community-based programming not to a mention a medium for local advertisers to sell their products. The question becomes how does radio make it easier or more compelling for the listener of the future to consume it.

"If I'm playing a Led Zeppelin record, every other rock station in America is probably playing the same Led Zepplin record, but what goes between the records is what makes us different," Rubber City's Mandel said. "We have to be better at being local. ... I'd like to think genuine over-the-air radio based in Akron or Cleveland can do something that the Internet-based digital providers don't do, and that is hyper focus on our communities."

That's not to say radio stations can afford to rest on their laurels. Not by a long shot. Innovation and adaptability, as with any other business, are key to their survival.

“Just like the combustion engine rendered the horse-drawn carriage and farming equipment obsolete, the same holds true for terrestrial radio,” oWOW’s Gorman said. “It won’t go away. There will be far fewer stations, both AM and FM, but those that survive will find alternate means of survival. The horse did not become extinct, but there are far fewer horses on the earth today than one hundred years ago.”

In his report, NYU'S Miller agrees a paradigm shift is coming, writing, "Unless the industry is set to make peace with a long and inevitable decline, radio needs to invest in strong and compelling digital services."

Gorman is more emphatic.

“Mark my word: the true survivors and innovators will be digital, online. And even if they maintain a terrestrial signal-- just like the trend from AM to FM in the early seventies-- the future will be on the new platform, online. That is, until someone figures out the sequel to the Internet.”